The Terrible Management Technique That Cost Microsoft Its Creativity

Vanity Fair has an article in its August issue that tells the story of how Microsoft "since 2000 . . . has fallen flat in every area it entered: e-books, music, search, social networking, etc., etc." According to a summary available online, the article finds a devastatingly destructive management technique at the heart of Microsoft's problems.

Author Kurt Eichenwald interviewed employees and found that

. . . a management system known as “stack ranking”—a program that forces every unit to declare a certain percentage of employees as top performers, good performers, average, and poor—effectively crippled Microsoft’s ability to innovate. “Every current and former Microsoft employee I interviewed—every one—cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees,” Eichenwald writes. “If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, 2 people were going to get a great review, 7 were going to get mediocre reviews, and 1 was going to get a terrible review,” says a former software developer. “It leads to employees focusing on competing with each other rather than competing with other companies.”

One former Microsoft engineer says that his performance reviews were "always much less about how I could become a better engineer and much more about my need to improve my visibility among other managers."

Eichenwald also reveals that Microsoft had a touch-screen e-reader developed in 1998, but Bill Gates nixed it because he "'didn't like the user interface, because it didn't look like Windows,' a programmer involved in the project recalls." The team that developed the reader was told to stop coming up with new ideas and instead work on software for Microsoft Office that would be instantly profitable. A founder of the group says, "We couldn't be focused anymore on developing technology that was effective for consumers. Instead, all of a sudden we had to look at this and say, 'How are we going to use this to make money?'"

A former Microsoft senior marketing manager concludes: "I see Microsoft as technology's answer to Sears. In the 40s, 50s, and 60s, Sears had it nailed. It was top-notch, but now it's just a barren wasteland. And that's Microsoft. The company just isn't cool anymore.